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Listen: Safeguarding your child’s education and health

by | Jun 21, 2024

Welcome to “Life Behind the Numbers,” a Discovery Life podcast series. Together with experts from Discovery Life, I delve into the latest trends from Discovery Life’s claims research, highlighting the need for both physical and financial protection against various risks.

In this episode, we tackle a topic often overlooked: the importance of child cover and the financial implications of unexpected events affecting our children.

I am joined by Kashmeera Kanji, Discovery Life’s Head of Market Analytics and R&D, and Sylvia Steyn, Head of Claims and Servicing. We explore how child insurance can protect against the high costs associated with severe childhood illnesses whilst still providing for education costs.

Kashmeera and Sylvia share insights on the hidden costs that medical schemes don’t cover, such as taking time off work, home adaptations, and special schooling. We discuss real-life examples, like claims for childhood cancers, and the benefits of automatic child severe illness and parent care benefits.

We also examine the significance of protecting your child’s educational future and how Discovery Life’s Global Family Coverage and the Global Education Protector benefit ensure that your child’s education is funded, even if you are no longer able to provide for it.

Finally, we explore the importance of diversifying risk cover, including options for overseas education through the Discovery Dollar Life Plan and the Dollar Global Education Protector.

Transcript

Maya Fisher French: Welcome to “Life Behind the Numbers”, a Discovery Life podcast series. I’m your host, Maya Fisher French, and together with experts from Discovery Life, we are unpacking the latest trends revealed in the Discovery Life claims research and what this means about the need to protect ourselves, both physically and financially, from the kinds of risks we face.

And one of those risks that we overlook – or perhaps avoid thinking about – is something happening to our children or something happening to us, which impacts our ability to fund our children’s educational needs.

To discuss this, I’m joined by Head of Market Analytics and R & D,  Kashmeera Kanji and Sylvia Steyn, Head of Claims and Servicing. Welcome to you both.

To kick off, as mentioned, Discovery Life recently published their latest claim statistics, and there’s a very important aspect of the 2023 claims insights that I think we need to discuss in youth month: cover for children.

Low takeup of child cover

Kash, I know that typically, this insurance does have a low uptake. Why do you think that is?

Kashmeera Kanji: This is such an important topic, in the backdrop of youth month And I think it’s really significant in that people consider the possibility of experiencing a cancer event or a death or a disability, even as a result of an accident.

But you seldom want to think about it happening to a loved one and specifically to a child. It is too emotive, and it’s something we push to the back of our minds, to the darkest possible space and hope that we never have to deal with something like that.

Being a new mom, I think about that all the time. My primary concern is his safety and just keeping him healthy. I don’t necessarily think about the unthinkable. That is why I think we’re seeing low takeup on a product that I feel is so incredibly important: child insurance.

In the context of what it costs, it’s incredibly inexpensive. You and I probably have insurance on our cellphones, on our cars – replaceable items, if you think about it. They just have a monetary value.

But you can eventually buy a new car or a new phone, but your child is completely irreplaceable. You wouldn’t want to have to be concerned about money at a time when they’re going through something like an illness or have an accident. This product is designed for that.

Maya Fisher French: It’s an interesting comparison. I think sometimes we forget about the point of insurance: what is it that we’re insuring and what is important to us.

I did actually take out insurance for both my boys once they started driving, because I realised that the biggest risk to them – and actually for me, if I’m honest, because I would be funding it – was them becoming permanently disabled.

But I hadn’t really thought about the severe illness cover as well. Sylvia, this is a question for you: how prevalent is illness in children and why does one need the benefit if you already belong to a medical scheme?

Sylvia Steyn: It is actually very prevalent. Conditions like childhood cancers and development disorders like speech or cognitive impairments come at a high cost. While medical aid typically covers the treatment of these costs, it doesn’t cover the hidden costs.

These would be things like taking time off work to care for the child, adaptations to the home, perhaps putting a child into a special-needs school. All these things come at a price.

Last year, Discovery paid over 220 claims under the automatic child severe illness and parent care benefits. And in total, more than R11.7 million has been paid under these benefits to cover those hidden costs.

Kashmeera Kanji: If I can jump in there, I think the number that Silvia’s highlighted is important, because, as I’ve said, takeup on these products that can be purchased – coupon products outside of your main insurance – is very low. The benefits that Silvia is referring to, are benefits that are automatically built in to your policy for your children, at a very low sum assured.

And whilst that low sum assured can cater for some of these hidden costs, we’ve identified that it is sometimes not enough. Oftentimes children face these rare conditions and diseases that need very specialised treatment that, for example, might require you to relocate so you can go to a medical centre that actually can cater for this particular condition. Those costs can escalate.

It’s so important to have this additional layer of cover to ensure that money is not a concern at a time like that. Not worrying about what is and isn’t covered by your medical scheme isn’t your primary concern. At that time, your primary concern is getting your child to the best possible state of health that they could then be in.

Maya Fisher French: You’ve had 220 claims, and you have given an example of some of the things that a parent may need funds for, but Sylvia, can you maybe give us some real examples?

Sylvia Steyn: Quite a common cancer in young children is leukaemia, and for any childhood cancers, we automatically pay 100%. Sadly we’ve had quite a number of claims for leukaemia, lymphoma, brain tumours. So, yes, it’s a very real product that does compensate parents when they need it most.

Providing for your child’s education

Maya Fisher French: So we’ve spoken about the child getting ill, but the other important aspect of child cover is the parents’ ability to provide for a child if something happens to them. Every parent wants to give their children the best possible education they can. But what if they are not around to do so? Discovery Life’s 2023 claims report had some very interesting statistics in this regard. Perhaps you can share that with us?

Kashmeera Kanji: That is so important. There are two things that I think about when protecting my son financially: the one thing is ensuring that I can provide for my child should he become sick or face an illness – knowing  I don’t have to sell the roof above my head to do that. And that’s what we’ve been talking about to now.

The other thing is protecting his financial future: his ability to earn, his educational aspirations, him developing a career. Education is a critical foundation for those aspirations, and protecting for that is equally important. That’s what we call “global family coverage”: ensuring that you’ve protected your family financially on all these grounds.

Education specficially follows a very different inflationary trajectory than normal inflation. Education costs tend to increase by more than just inflation year on year, so typically, the cover that a parent might take out under a normal life insurance policy may not track according to how the education costs increase during that time.

It’s important to use a product that tracks that education cost. These education costs can be from day one. Should something happen to me now, my child hasn’t even started at school, and that’s effectively 20-odd years of educational funding that I need to provide for. Or it could be when the child is close to starting tertiary education.

But we don’t know, do we? So how do you save for that? How do you plan for that? This product does exactly that. From day one that you take out this cover, you’ve ensured that at any point in time during your child’s educational journey, should you no longer be able to afford that education –– whether that’s because you’ve become disabled, are unable to work, you’re ill, or, God forbid, you pass away – then that the product can just kick in and replace your income to fund that education.

And to answer your question exactly, I think we’re seeing that more and more parents are realising the importance of having this cover. Because we have better takeup of this product, we’re actually seeing an increase in the number of claims that we pay year on year.

We saw a 33% increase since the previous year in claims under this benefit, which means that parents have been adequately covered for the cost of education. And it’s not just in the case of the death of a parent. Say you’re undergoing treatment for cancer – your finances are drained and education costs are not something that you need to think about. With this cover, it is funded.

An increase in claims shows the growing need for the product, which I think is a very proud moment for us and a testament to the product.

Sylvia Steyn: We actually have a university funder benefit that’s linked to the global education protector benefit, and we expect to pay over R2.9 billion in future tertiary education. And that’s just for the clients that are currently on global education at the moment. This benefit is unique in that each year that a parent engages in Vitality, they actually earn a percentage of their child’s future education. They can earn up to 100% of funding for three years of their child’s tertiary education just by managing their health and improving it along with their Vitality status. It’s as easy as that.

Maya Fisher French: So just to understand correctly: you’ve taken out a life insurance policy, but even if you’re still alive – which of course every parent aims to be – you still receive a benefit towards your child’s education? You don’t have to wait for an event in order to benefit from it, is that correct?

Kashmeera Kanji: Spot on. That’s exactly it. It’s solving for this conundrum of whether to prioritise saving towards the cost of education – which I think is every parent’s continual nightmare – or to prioritise paying a life insurance premium in order to cover the cost of education if I’m not there anymore to cover that cost.

These are two things that you have to consider as a parent. This product is trying to cover both of those things in a single premium, and it’s done it so marvellously.

If I can give you an example of how this has played out: we’ve had a, child, John, who’s been covered under a private global education product. And his parent had taken this out at a time that allowed the parent to fund up to 40% of his tertiary education in the first year of his university. And what that means for John is that in his first year of education, he’s had R28 000 funded.

His parents have accumulated 40% of the cost of his first-year education at university – R28 000 – which equates to 95% of every premium that his parents have paid towards protecting for the possibility of not being around to pay for his education.

Maya Fisher French: So he’s been paid out this amount for the university fees, but his parents still have the cover in force, so they’ve got the benefit of having the life cover in force, plus being able to have the payout benefit for him at university?

Kashmeera Kanji: That’s exactly it. And that just shows that the consideration shouldn’t be whether I only take this product if I know I’m going to be Diamond for every single year that I have the product. It’s not that I think every accumulation towards that tertiary fund is effectively netting off any premiums that you’ve paid towards this, all whilst you keep the cover. That could pay for every cent of education should something go wrong.

Maya Fisher French: But it’s still great motivation to keep you on Diamond to think, “Wow, if I stay here, my kid’s education is going to be paid.” That is actually a good motivation, I must say.

Funding overseas tertiary education

Before we wrap up, I want to talk about something that’s often overlooked. We always talk about diversifying your investments, but it’s also important to diversify risk cover. Are people increasingly looking at taking out insurance that will cover their children’s overseas studies?

Sylvia Steyn: Absolutely, yes. We have risk products geared towards protecting our clients globally. Many of our clients diversify their risk by taking out a portion of the risk cover locally and another portion offshore through what’s known as the Discovery Dollar Life Plan.

That product offers offshore risk cover in US dollars, and we pay out in dollars, while the Dollar Global Education Protector Benefit covers the costs of international education costs for your child. This comes to fruition in the event of a parent dying or suffering from a severe illness or disability.

Maya Fisher French: Can you tell us more about the Dollar Global Education Plan, but also if they also benefit from this funding of tertiary education.

Kashmeera Kanji: As you know, we strive to incorporate a shared-value component in every part of our product suite. And this includes a college funder benefit. A parent can take out this offshore-based risk product, for education purposes, which we call the Dollar Global Education Protector. It basically allows higher limits because as you know, the cost of education for a South African at an overseas university is that much more.

Taking into account residence fees or other accommodation – it all adds up. It’s not just education costs that you then need to think about. It’s all the costs associated with moving a child to a foreign country as well as trying to educate them at an institute that’s charging an equivalent for what a parent in that country can afford.

The Dollar Global Education Protector is designed for exactly that. It covers the costs of educational institutions outside of South Africa and allows this breadth of cover so that no matter where your child wishes to study and what their path is – it could be in the arts, it could be in the sciences, it could even be one of those prestigious universities like Juilliard or Harvard – the cost of education would be fully funded.

That gives a parent that additional peace of mind – that your child is not limited to a specific subset of educational institutions. The world is then their oyster.

And then to touch on the shared-value component which we’ve built in, the university funder benefit is the local one, but we have a college funder benefit that then works in exactly the same way with the same shared-value mechanism, bringing in that element.

A parent has now covered for the possibility of funding their child’s education outside of South Africa if they’re not around, but at the same time, they’ve covered for the possibility of their child going to university offshore even if nothing happens to them. The college funder benefit is there for exactly that, using the exact same shared-value mechanisms and a parent’s engagement in their health.

Maya Fisher French: I think the fact that more South Africans are sending their children to study overseas  or moving around for work – we’re seeing that increasingly – reinforces why it’s so important to diversify your risk cover along with, of course, ensuring that your children are protected against severe childhood illnesses.

Thank you both for your input. I’m sure it’s given our listeners valuable insight into something which is often a difficult topic to talk about.

To better understand how comprehensive life insurance cover can not only protect you and your family, but also adapt to suit your ever-changing needs, head over to the “Covering what you care about” section on Discovery’s Smart Money hub.

Here you’ll find a wealth of resources to strengthen your financial footing in the most protective of ways. You can also visit Discovery.co.za for more details on Discovery Life’s full range of cover benefits or chat directly to a Discovery certified financial advisor.

This podcast was sponsored by Discovery Life.

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Maya Fisher-French author of Money Questions Answered

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